Pocket FM bags $103-million funding led by Lightspeed to power its global expansion

(Left to right) Pocket FM founders Prateek Dixit, Rohan Nayak and Nishanth KS

Audio entertainment platform Pocket FM on March 20 said that it has raised $103 million in Series D funding, as the company looks to expand into Europe and Latin America markets as well as strengthen its presence in the United States.

The capital will also be used by Pocket FM to accelerate its generative AI efforts and strengthen its content library.

Venture capital firm Lightspeed led the investment with participation from private markets investment firm Stepstone Group, marking a rare late-stage financing round amid the current funding winter. With this investment, Pocket FM has raised a total funding of about $196.5 million to date.

Pocket FM co-founder Rohan Nayak told Moneycontrol that the funds were raised at a post-money valuation of $750 million.

The investment comes amidst a rapid revenue growth at the Bengaluru-based startup, which offers serialised audio content across different genres, fueled by microtransactions and its advertising business.

Nayak said that Pocket FM has clocked an annualised revenue rate (ARR) of $150 million across the world as of December 2023, a feat achieved in less than two years and growing by 57 percent on a quarterly basis. Of this, more than $100 million comes from the United States, he said.

Why microtransactions?

Pocket FM, which previously offered its content through various subscription plans, moved to a microtransactions-led model in early 2022. The platform now offers consumers free access to a few episodes every 24 hours. To access more episodes, users can purchase virtual coins to unlock them, a model that is quite prevalent among several prominent mobile games.

Nayak said this reduces the barrier for entry for consumers. At the same time, people can also pay only for content that they want to consume rather than the entire content library on the platform.

"The culmination of fine tuning our growth model and moving our business model to microtransactions lead to an inflection point in our journey" he said.

In December 2023, Pocket FM said that it clocked over 20 million transactions in 2023, closing the year with 2.5 million monthly transactions. The audio content was streamed for over 75 billion minutes during the year, with an average monthly streaming of over 6 billion minutes.

The company had also claimed that it has over 130 million listeners across the world who are spending an average of over 115 minutes every day.

About 13 audio series had surpassed the Rs 10 crore revenue mark, while 25 series had achieved Rs 5 crore in collections as of December 2023.

Among its top series include Saving Nora, an audio revenge drama series, that has clocked about Rs 150 crore revenue to date and Insta Millionaire, a rags-to-riches romance series, that has crossed Rs 100 crore in revenue, Nayak said.

"What sets Pocket FM apart is its vision to set up a sustainable and profitable business, backed by its unique pricing strategy. It emerges as a great reference for the entertainment landscape, with its capability to demonstrate strong unit economics" said Harsha Kumar, Partner at Lightspeed.

Read: Pocket FM's India arm revenue jumps to Rs 131 crore in FY23; loss reduces by 56%

Where will the money go?

Nayak said the company plans to use the funds raised to expand into more geographies, a move that is likely to further accelerate the audio content platform's revenues.

"I believe we have created a playbook. We want to expand to Europe and Latin America, starting with the United Kingdom, Germany and Brazil" he said.

Pocket FM forayed into the United States in Q4 2022 and claims to currently have 10 million registered users in the country. These users are spending over 135 minutes on a daily basis, the company said.

In January, the audio series startup elevated the firm's global growth head Lalit Gangwar as vice president and country head for the United States market, where he will lead content operations and revenue growth.

The audio content platform also plans to make significant investments in expanding its catalogue to cater to the growing content demands from its users.

Read: Pocket FM earmarks Rs 250 cr fund for writers contributing to platform

Founded in 2018 by Nayak, Prateek Dixit, and Nishanth Srinivas, the service claims to currently offer over 100,000 hours of content, including over 2,000 exclusive audio series and more than 400,000 episodes.

This content spans across genres such as romance, drama, thriller, fantasy, and science fiction in English and several Indian languages such as Hindi, Tamil, Telugu, Malayalam, Bengali, Kannada, and Marathi.

In February, Pocket FM launched an online novel reading platform, Pocket Novel, as part of the company's efforts to expand its offerings to other entertainment categories and formats.

The announcement came after a year-long beta phase, during which time the firm claims to have attracted over 150,000 writers. Some of the top-performing writers have even earned incomes exceeding $2,500 every month, it said.

The Bengaluru-based startup plans to invest $40 million towards this product with a goal to achieve $100 million ARR globally by 2025.

"The longer term vision is to build an entertainment business, starting from audio and I think we are building some foundational stuff right now. We're in the business of finding great stories from all around the world so that these become big IPs and we can expand it into multiple formats" Nayak said.

That said, he said that the company is yet to figure out the right model to expand to other formats. "Building so many different formats is not easy. We will have to prioritise and see how it goes" he said.

Generative AI push

Nayak said the recent advances in generative AI will unlock significant productivity and efficiency for writers on its platform and the company is building AI tools to help them create content in a more efficient and productive manner.

One such tool is the ability for writers to create audio series using AI voices. Writers can come onto the platform, select an AI voice that suits their story to create an audio series, Nayak said. More than 2,500 audio series were created through this manner just in February 2024, he said.

Read: Pocket FM ropes in former Netflix executive to lead AI push

Pocket FM also plans to leverage this technology to build AI-powered personalised recommendations to consumers.

India's audio series market is projected to surge from 350 million users in 2023 to 540 million by 2027, according to a recent report by market research firm Redseer. It said that India and the United States have led the adoption for audio series across the world in the past two years.

The global audio series market is estimated at $21-25 billion in 2023 and is projected to double in value by 2027, the report said.